Restaurant Marketing

Eaters prefer independent restaurants over chains, according to Yelp research

February 20, 2018

Michelle Kim

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Good news for small business owners: people are more interested in dining at a local restaurant than chains. If you run a restaurant, you know just how important reviews platforms, like Yelp, can be for your business – big or small.

We partnered with Yelp just a few months ago to better understand the benefits of getting customer feedback as well as learn best practices for managing your online reputation. That’s why we wanted to be sure you don’t miss this new report from Yelp that delves into small business trends across the country.

Its latest Local Economic Outlook found independent fast-food and fast-casual restaurants have seen a continued increase in average ratings – up 7 percent over the last five years. Are you seeing this?

On the contrary, fast-food chain restaurants have experienced a 16 percent decrease in average ratings – which is equivalent to one-third of a star – over the last five years.

As a result, the national average rating for a fast-food chain decreased to 2.82 from 3.18 stars over the five-year period while independent fast-food restaurants increased to 3.85 from an average of 3.65 stars.

“Consumers are embracing local in all aspects of their lives, and this includes the restaurants they visit,” Technomic’s Senior Principal Dave Henkes told Yelp. “Consumers tell us that smaller, independent restaurants are more authentic, offer better and more unique menu items, align more closely to consumer needs, and provide better value than their chain counterparts.”

Nationwide, most fast casual restaurants are independent, and Yelp reviews matter a great deal for them. A Harvard Business School study found that a one-star increase in Yelp rating for independent restaurants leads to a 5 to 9 percent increase in revenue.

Yelp categorized restaurants with unique names as independent and those that shared an identical name with at least four locations of the same type as chains. They also took a look at the parts of the country seeing the greatest growth based on their analysis. Here are the top five metro areas in the U.S. that ranked highest for business growth in the fourth quarter of 2017.

1. Charleston, South CarolinaFueled by a housing boom, the Charleston region’s economy has been growing much faster than the national average in recent years.

2. Phoenix, ArizonaYelp data found the number of small businesses grew faster in Phoenix than in any other major U.S. metro during the fourth quarter of 2017.

3. Salt Lake City, UtahUtah has the highest job growth in the nation, including Amazon’s recent announcement of buildings its next fulfillment center. The boost in jobs is fueling the demand for restaurants, shopping and services.

4. Orlando, FloridaThanks in part to reasonable housing prices, the boom in business growth has helped decrease the unemployment rate from a year ago.

5. Honolulu, HawaiiHonolulu has one of the nation’s lowest unemployment rates as the business population grew. Businesses may face challenges hiring talent due to high housing costs.

The bottom line: the key to success in the restaurant industry is having a unique and defining point of differentiation, says Henkes. For too many chains, this differentiation has been lost and is an area that smaller, independent restaurants excel at.